The 30 hours free childcare scheme and Tax-Free Childcare were written with monthly payslips in mind. If you are self-employed, your income does not arrive that way, and the rules that accommodate this are real but poorly advertised. Several self-employed parents assume they do not qualify when they do.
You are not tested on last year
The earnings test asks what you expect to earn over the next three months, not what you earned last year. That is the single most useful thing to know, because it means a quiet quarter behind you does not disqualify you, and a seasonal business can still qualify in the quarters that matter.
The minimum for 2026/27, based on 16 hours a week at the National Minimum Wage:
| Your age | Per quarter |
|---|---|
| 21 or over | about £2,644 |
| 18 to 20 | about £2,257 |
| 16 to 17, or apprentice | about £1,664 |
You may also use an annual average rather than a single quarter, which is the provision designed for irregular income. If your work is lumpy — a strong spring and a thin autumn — averaging across the year can carry you through quarters that would fail on their own.
Your first year is exempt
There is no minimum earnings test during your first 12 months of self-employment. This applies to both Tax-Free Childcare and the funded hours.
Two conditions worth noting: it is available once in any 48-month period, so it is not renewable by restarting a business each year; and it exempts you from the earnings floor only. The £100,000 ceiling still applies.
The income ceiling still applies, and it is measured differently
Neither parent's adjusted net income may exceed £100,000. For a self-employed parent that means your taxable trading profit after allowable expenses, plus any other taxable income — dividends if you run a company, rental profit, interest.
Three things that catch people out:
- It is profit, not turnover. A £140,000 turnover with £50,000 of genuine expenses is £90,000 of profit.
- Dividends count. If you take a small salary and the rest in dividends, the dividends are part of adjusted net income.
- Pension contributions reduce it. Personal contributions made under relief at source are deducted gross, which for a director near the threshold is often the cleanest lever.
The threshold is a hard cliff with no taper, so being a few hundred pounds over costs you both schemes entirely.
Reconfirming when you do not know your income
Every three months, you confirm you still expect to meet the conditions. For employed parents this is a formality. For self-employed parents it is a genuine estimate, and the honest answer is that you are forecasting.
A few practical habits:
- Reconfirm on the basis of what you reasonably expect, and keep a brief note of how you arrived at it. An estimate made in good faith that turns out wrong is a different thing from a careless one.
- If you go over £100,000 temporarily, you do not lose the current quarter — there is no mid-quarter clawback — but you will be ineligible from the next reconfirmation.
- Diarise the dates. The window is the last 28 days of each period, and missing it stops the funding rather than prompting a reminder.
If you are a company director
You are likely an employee of your own company for some purposes and self-employed in spirit, which makes the rules read awkwardly. The points that matter:
- Salary plus dividends both count toward adjusted net income.
- Employer pension contributions from your company do not form part of your adjusted net income, which makes them a useful route near the threshold — one worth discussing with your accountant, since the interaction with corporation tax and the annual allowance is not trivial.
- The start-up exemption applies to the first 12 months of self-employment, so check with HMRC how it applies to your particular structure.
Common questions
I made a loss last quarter. Do I lose the funding?
Not automatically — the test is forward-looking, and you may also use an annual average. A loss-making quarter inside a viable year is exactly the case the averaging provision exists for.
Do I need accounts to apply?
No. You are confirming expected earnings, not submitting figures. Keep your own record of the basis for the estimate.
I started trading eight months ago. Which rules apply?
The start-up exemption runs for 12 months from when you began, so you are inside it. Plan for the earnings test resuming when it ends.
Does the Self Assessment payment on account affect the calculation?
No. Adjusted net income is based on income, not on when tax is paid.
My partner is employed and I am self-employed. How is it assessed?
Each of you is assessed separately against both the earnings floor and the £100,000 ceiling, using whichever basis fits your circumstances.